Sales and Marketing Background of Lawson - Case Study Example

A formal business report on a case study company, commenting upon and making recommendations about the current and future use of direct and database marketing for the case study organisation. Introduction We examine the real life case of the Lawson company and their adoption of a direct and database marketing strategy (RRW 2008). The Lawson company serves a variety of sectors, including aerospace, agricultural, automotive, construction and transport, by selling a wide range of products such as rivets, screws and related fasteners (Lawson Company 2008). The company presents two points of interest as a case study in this domain. Firstly, as a large company (over $500 million in annual sales), they have only recently begun to market to individual customers whose records are held on the company's database. This initiative dates from the start of 2007. They are now starting to pursue the natural progression relationship marketing, where their marketing communication to a customer will be defined according to the nature of that customer. Secondly, they sell through an indirect channel, yet their efforts can be defined as direct marketing because it is done to customers with the goal of a direct response in return (Tapp 2004 p4). Sales and Marketing background To reach the wide customer base currently served, Lawson uses indirect sales via 1600 independent sales representatives. As their sales channel is therefore highly granular as well as being independent, information flow back to Lawson is limited, in particular for analysis of customer data or tracking of marketing campaigns. The industry sector is also one that typically does not exploit the possibilities of database marketing, although in the light of the competitive situation, this may change (RRW 2008). The company saw that more effective marketing was required and hired executives with marketing skills to address the situation (Adcock et al 2001). These new members of the company realised that instead of treating all customers as the same, it was necessary to capture customer details in order to build a relationship with that customer and by personalising the treatment given, to maximise the possibilities of repeat business (Tapp 2004 p4). Lawson decided to implement a direct and database marketing plan. The company's data at the time was distributed in an ad hoc fashion between spreadsheets, smaller databases and mailing lists. Although it gave personal customer data and purchase data on what different customers had bought, it lacked the data on what communication or sales campaign history was and what responses the customer might have given. It was in this sense not a full marketing database (Goldwag 2003). A number of related software applications were implemented to address this situation, including applications to cleanse data, analyse it, store it in an SQL database and provide reports. The cleansing of the data is to prevent duplication of records as well as invalid addresses or customers who have requested that no contact be made. The analysis is currently done to assess the effectiveness of Lawson's life cycle marketing with particular emphasis on customer retention. This is a time-series method, which as a short-term measure is relatively fast and precise for the prediction of customer response and sales revenue (Tapp 2004 p59). The conclusions that Lawson has reached so far are that there is considerable turnover of customers and therefore lower customer loyalty, and that customer defection happens rapidly and therefore demands a rapid response from Lawson. This is the short-term answer until the marketing team refines a model that not only let them exploit the end customer's growing wish to have direct contact with the manufacturer of the good that they purchase, but also uses this direct marketing to add value to products such as rivets and screws that are often perceived as a commodity offering (Tapp 2004 p15). A figure for the return on investment on the efforts made so far is unavailable. Lawson's evaluation of the benefits is that it can identify its best customers better, as well as its best products and specific pricing that will work best. This is typical of database marketers in other industries who have understood how sales data may be understood as customer behaviour data, allowing them to segments such customers as a function of their value to the company (Tapp 2004 p51). In addition, it can identify ideal customers in ideal industries. The basis for further improvement comes from the analysis of the data that contributes also in segment and product marketing. Lawson cites the competitive context as a driver for implementing direct and database marketing. Tapp (p50) cites several authors including Peters and Waterman (2004) as seeing information as the only remaining sustainable competitive advantage. Whereas the classic product "unique selling proposition" (which Lawson may not have anyway) can be easily copied, information of the type generated in a database marketing activity is more difficult for a competitor to imitate. Future Use Lawson's goal is to process more data with its software applications in order to increase the impact of its actions afterwards. It is moving from general marketing research techniques for modelling individual customer behaviour, to database marketing to identify where the best response is and what are the best offers to make. In database marketing, small samples are often used to test an idea before wider spread deployment (Tapp 2004 p12), which is an alternative for Lawson and may improve upon their current policy. From a certain point of view, Lawson may be fortunate to have its activity in a sector where product "unique selling benefits" are relatively scarce. It will be less tempted to cling to an increasingly outdated mode of marketing and selling, and more motivated to differentiate its offering in terms of superior service or individualised product combinations which will do more to boost customer retention and loyalty (Tapp 2004 p16). Lawson will also be able improve its information on its own return on investment by using the customer profile data that it is amassing to better understand the relationship with campaign response and in addition to be able to effectively target new customers more precisely (Tapp 2004 p52). Taking a medium-term to long-term view of the situation will orient Lawson towards different techniques to predict customer response and sales success. Rather than just the times series methods referred to above where Lawson relies on past data to predict the future, explanatory techniques allow a more strategic prediction, because they identify the factors that drive customer response, estimate their effect and allow projections to be made in to the future (Tapp 2004 p59). Pitfalls to be avoided As Lawson's database marketing grows, it will have to work harder to ensure that its information is always up to date. Even if the problem is less pronounced in the business sector than it is in the consumer sector, the "goneaway" problem is always present, where an uncomfortably high percentage of all communication gets sent to contacts or even companies that have "gone away", meaning that the address data held in the data base is not valid (Tapp 2004 p36). Lawson will have to monitor this with due attention to avoid return on investment declining because of wasted effort in contacting people or companies who are no longer there. Lawson has correctly identified the priority associated with the identification of the most profitable customers by using the database. Accelerating the loyalty life-cycle can be highly beneficial for sales and overall profitability, as "young" 1 or 2 year customers can be encourage to take on the role of say tenth year "high-loyalty" customers, who are among the customers that are the most profitable for the company. Higher loyalty should attract higher rewards, meaning a higher share in the value that Lawson chooses to distribute to its market (Adcock et al 2001). Lawson will have a double challenge here. The first aspect will be to communicate this value via the indirect sales channel, although this may be relatively simple with the sales representatives' cooperation. The second aspect will be to design such a value sharing system to reward the best customers with the best value, and not indiscriminately reward any business simply for ordering extra items or trying a product or a service (O'Brien & Jones 2008). Database marketing will allow the right solutions to be put in place here. Moreover, the Lawson company web site (www.lawsonproducts.com) has already adopted this notion of adapting the discount structure to the customer in question - product information is displayed, but customers are invited to " call [their] agent for information on [their] specific pricing". (Chaffey 2006). Conclusion Lawson has already taken a lead on its competitors in this market, by its use of database marketing. It has also accomplished a number of actions and identified others that correspond to current thinking in this field. As such, a number of different possibilities open up to Lawson in the near future. It can improve its sales profitability, it can improve its position relative to its competitors by encouraging high value customers and discouraging low value ones, the latter then migrating gradually to competitors. Whatever its plans for extending its database marketing activities, it will do better by avoiding expensive "one-off" campaigns and by using database marketing to enhance its medium- to long-term activities. References: Adcock, D., Halborg, A. & Ross, C. (2001). Marketing: Principles and Practice, 4th ed.. Financial Times/ Prentice Hall Chaffey, D. (2006). Internet Marketing, 3rd ed.. Financial Times/ Prentice Hall Goldwag, W. (2003). Why IT solutions will never solve marketing woes. Precision Marketing. http://findarticles.com/p/articles/mi_go1551/is_200305/ai_n8671689 Lawson Company (2008). Welcome to Lawson Products (Retrieved April 11th, 2008). http://www.lawsonproducts.com O'Brien, L. & Jones, C.(2008). Do Rewards Really Create Loyalty (PDF Download from Amazon.com, April 11th, 2008). Harvard Business Review. Peters, T. & Waterman, R.H. (2004). In Search Of Excellence. Profile Books Limited, London. Tapp, A. (2004). Principles of Direct and Database Marketing. Financial Times / Prentice Hall. RRW Consulting (2008). Case Study Monday : B2B Database Marketing (Retrieved April 11th, 2008). http://rrwdatabasemarketing.blogspot.com/2008/02/case-study-monday-b2b-database.html Read More